Gold recovered from a near one-week low on Thursday, with a softer dollar offsetting earlier pressure from US-Iran tensions that had stoked inflation concerns and expectations of a prolonged high interest rate environment.
Spot gold rose 0.8% to $4,107.69 per ounce by 07:37 GMT, a day after touching its lowest level since July 1. US gold futures for August delivery climbed 0.9% to $4,117.30.
The dollar slipped 0.1%, making dollar-priced gold cheaper for holders of other currencies. The move came after President Donald Trump said on Thursday that Iranian officials had contacted him seeking a deal with Washington.
The US military had announced strikes on Iran on Wednesday to keep the Strait of Hormuz open to shipping. Iran responded with attacks in Kuwait and Bahrain, raising doubts about the durability of a fragile ceasefire between the two countries.
Kelvin Wong, senior market analyst at OANDA, said the dollar’s softening reflected “the possibility of Iran reaching a deal with the US, as announced by Trump.” He added that after Wednesday’s exchange of strikes, “the temporary ceasefire between the US and Iran has become fragile at this point, so things may become volatile again.”
Markets currently price a 65% probability of a US interest rate rise in September, according to CME’s FedWatch tool. While gold is traditionally viewed as an inflation hedge, higher interest rates tend to weigh on the non-yielding metal.
Other precious metals also gained. Silver rose 1.5% to $59.14 per ounce, platinum climbed 2.2% to $1,611.83, and palladium added 2.5% to $1,244.46.
